Orchid's biz from dosage formulations to be half of revenue

Last Updated: Sun, Oct 28, 2012 19:41 hrs

Chennai-based Orchid Chemicals and Pharmaceuticals Ltd expects its finished dosage formulations business to account for 50 per cent of the total revenue in a year’s time, as part of its efforts to shift focus from manufacturing of active pharmaceutical ingredients to formulations and contract manufacturing.

Prior to its sales of carbapenem and penicillin API facility in Aurangabad and related R&D facility along with product pipelines to the Indian subsidiary of US-based Hospira Inc, the company had a business mix of 62.5 per cent APIs and around 37.5 per cent of finished formulations, R&D and contract manufacturing operations . After the sales, the proportion has changed and the company is aiming at a ratio of 50:50 between API and formulations within a year, said K Raghavendra Rao, chairman and managing director, Orchid Pharma.

“Almost all incremental business going forward will be in the form of dosage forms with the exception of Cephalosporin API supply for Hospira’s Add-Vantage vials. Hence, I see the ratio going to 50:50 within a year or so,” he said. The future investments of the company, which has been investing into APIs, the main ingredients in the final products, would be in developing capabilities for the final products rather than the ingredients, he added.

The revenue break-up prior to the divestment was: Of the around $400 million, the total API business was around $250 million, including $100 million from sales of APIs to Hospira and another $150 million from sales of cephalosporin API in emerging markets. The rest of the business stood at $150 million, which came from among others dosage form value-added services and contract research and manufacturing services, according to Rao. Prior to sales, APIs accounted for 62.5 per cent while other businesses including finished dosage and R&D stood at 37.5 per cent.

Through a divestment in August, the company sold its API and related R&D business, which accounted for $85 million of the turnover, to Hospira for $200 million.

Post sale, the business mix changed and the API business is now $165 million, including $150 million from sales of Cephalosporin APIs in emerging markets and $15 million of sales of APIs to Hospira, which continue to be with Orchid.

Thus, API business would make up $165 million of the $315 million while the dosage form and R&D services saw revenues of $150 million, he said. With this, the API business makes up 52 per cent and the dosage form and R&D services account for the rest. The company expects the focus on finished dosage in future to help increase this business and make up 50 per cent of the total business within a year.

The company is also planning to grow its contract manufacturing business. While the business in contract manufacturing is around 5 per cent of its business presently, plans are afoot to increase the share of this business segment to go up to 15-20 per cent in three years, he added.

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